GNC taps new advisor to explore potential workout options

08 February,2018 - 12:00 pm UTC

Author(s): by Reshmi Basu

GNC Holdings has retained Alvarez & Marsal to help draft a restructuring contingency plan should the company’s efforts to address near-term maturities fall flat, according to three sources familiar with the situation.

The vitamin and supplement retailer is under the gun to address a March 2019 maturity of a USD 1.2bn term loan in order to avoid a going concern qualification in its FY17 earnings report. To that end, GNC banker Goldman Sachs last month started to contact lenders, asking certain funds to get restricted in order to negotiate a new liability management plan.

Recent efforts over the past year – such as amend-and-extend talks, and a refinancing plan – failed as both the company and investors couldn’t agree on economics.

As such, some investors have speculated that any new proposal would include two tranches with the junior portion including an equity component, such as warrants, said an additional source.

The borrower’s existing USD 1.2bn Libor+ 250bps (75bps floor) TLB due 2019 is quoted in the 90.714/92.231 context, up from 80.643/82/696 in mid-January, according to Markit. The loans were quoted as high as 96.036/97.867 on 9 November.

At quarter-end, the issuer had USD 64m of cash and an undrawn revolver, after paying down borrowings. The company reiterated its free cash flow estimate at USD 190m- USD 210m for FY17.

Late last year, GNC executed a private exchange in which USD 98.9m of its USD 280m 1.5% convertible notes due 2020 swapped into 14.6m shares of GNC’s class A common stock, along with USD 0.5m in cash, SEC documents showed. The bonds last traded in size at 56.563 on 25 January, up from 50.375 on 9 January, according to MarketAxess. Its shares traded today at USD 4.26 against a 52-week range of USD 3.13- USD 10.95 on a USD 355.843m market cap.

“As previously announced, GNC is working with Goldman Sachs to evaluate alternatives to optimize the Company’s capital structure and other alternatives to enhance shareholder value. That work remains active and ongoing," according to a company spokesperson.